What are smart contracts?
As mentioned in an earlier article, the purpose of Ethereum is to be a platform on which smart contracts can run. But what are these? Let’s explain with a simplified example of what Ethereum might be able to do in future.
Ethereum aims to make everyday life more efficient and cost effective by automating everyday processes and removing middlemen from the systems we use. This could be to the legal system, the financial system, computer systems or more.
For example, let’s assume John has the following documents stored on the Ethereum blockchain: his identity documents, his last will and testament, and the title deed for his house. We assume, the day John dies, his certificate of death is also uploaded to the blockchain.
The processes that must occur to transfer John’s estate are admin intensive because there are several parties involved that are often slow and opaque. This may include legal professionals, the government, tax authorities and the property registrar.
However, because all these documents are stored on the Ethereum blockchain, something interesting is possible. Once John’s death certificate is officially issued and uploaded to the blockchain, John’s last will and testament can be put into action.
Assuming John bequeathed his house to his next of kin, ownership to the house can be transferred to his next of kin automatically by the Ethereum network. Therefore, John’s next of kin will inherit John’s house exactly as John intended, without having to contact a legal professional.
This may sound overwhelming and scary but the amount of time and resources saved by not having to wait for John’s next of kin, legal professionals and the property registrar to come into contact with each other and prepare and execute this transaction is immense.
Many fascinating projects are being built but nothing like this works at scale at the moment. Many things need to fall in place for large scale adoption and it remains to be seen how instrumental Ethereum will be.